Friday, January 31, 2020

New Mesa County Foreclosures Hit 12-Year Low in December

Last time, we saw that "releases of deeds of trust" spiked in Mesa County. That suggests some strong demand for for-sale housing in the GJ metro area.

So, not surprisingly, we also find that foreclosures in the area fell to a 12-year low in the area. In fact, these numbers may be lower than anything we've seen in much more than 12 years, but I only have data going back to 2008. In other words, there were fewer new foreclosures in December 2019 than in any other month during which I collected this data.

Specifically,  during December, there were 11 notices of election and demand.  The "NED filing" is the first step in the foreclosure process. That's down from 17 in November 2011, and it's down from December 2018 when 19 NEDs were filed. As the blue line shows below, the NED filings total is even down from where it was in 2008.

The other measure of foreclosure activity "auction sales" has not dropped off quite as much. The "sale" step of the process is the end of the foreclosure process when the property is auctioned off to a new owner.

During December, a total of five properties were foreclosed and sold at auction. That's a low number, but not the lowest we've seen over the past 12 years. Sales totals have been largely flat over the past year, and have returned to what we saw back in early 2008.  Nonetheless, foreclosure auction sales can be said to be at historic lows.

This follows a general statewide trend. Most Colorado counties have seen big decreases in foreclosure activity with combined statewide totals also dipping near 12-year lows.

Moreover, keep in mind the population of both Mesa County and the state have increased over the past decade, so on a per capita basis, foreclosure activity has fallen well below where they were before 2008.

Releases of deeds of trust surge in Mesa County

A release of a deed of trust is an event that occurs when a deed of trust (often referred to as  a mortgage) is paid off, either through refinance, sale, or when all payments have been completed on a home loan. It is a "positive" economic indicator in sense that areas with improving economies tend to generally also report increases in releases of deeds of trust.

Other factors can be important as well. In cases where there is a housing shortage, but other economic indicators are robust, we might also see declining release activity. It's not always easy to know which factors are the key factors in whether or not releases are going up or down. 

We do know, though, that releases tend to go up when interest rates fall. And releases tend to go down when interest rates rise. We've seen this in the combined release data for the state's biggest countries.

Combining the state's big metro counties (plus Broomfield County) we saw that releases headed down in late 2018 as the Federal Reserve began to allow the fed funds rate to rise. The mortgage rate then followed suit, and releases trended downward. During 2019, however, the Fed began to push rates down again, and releases rose again at the same time:

So far, I only have the data for the combined metros through October. 

An odd thing happened in Mesa County during December, though. According to the Mesa County public trustee's latest data, releases spiked to the highest level I've seen since I began keeping track of releases back in 2008. 

Releases have generally been hovering between 600 and 800 per month in the county over the past two years. But in December, the total shot up to 1,253. That's a huge increase. For instance, in December 2018, the total number of releases was 569:

Based on what I have so far for the other metro counties, many counties are experiencing sizable increases — but this increases appears to be significantly larger than the other counties.  I spoke with the Mesa County PT and confirmed this is correct data, and it is not due to an administrative backlog or an artifact of processing. It does appear to be a result of real events in the local economy. It appears many homeowners in Grand Junction had the opportunity to refinance in December, and many took it. 

We'll know more at the end of January if this is a trend, or if just a quick spike that will soon return to normal. But in either case, the surge in releases suggest confidence in the local housing market on the part of lenders and investors in the secondary market. It may also suggest lenders anticipate the Fed will continue to take a dovish view on inflation and interest rates.